Prediction: This Synthetic Intelligence (AI) Firm Will Be Acquired in 2025 | The Motley Idiot

During the last couple of years, abnormally excessive inflation together with rising borrowing prices impressed some companies to focus extra on inner efforts and push off any concepts about acquisitions or particular tasks.

However now that inflation is cooling and the Federal Reserve has begun to taper rates of interest, company steadiness sheets are strengthening.

Furthermore, I believe it is solely a matter of time till the Federal Commerce Fee (FTC) chairwoman, Lina Khan, resigns earlier than President-elect Trump is sworn into workplace. One in all my essential predictions for 2025 is that mergers and acquisitions will see a comeback amid an enhancing macroeconomic image and the excessive probability that management on the FTC modifications below the incoming administration.

One firm that I see as a lovely acquisition candidate is SoundHound AI (SOUN 12.60%), which makes a speciality of voice-recognition assistants powered by synthetic intelligence (AI). Beneath, I’ll element why speech recognition is a crucial element of the AI ecosystem, and discover why SoundHound AI seems to be like a logical acquisition prospect.

Why is voice-powered AI so essential?

Voice-enabled AI makes use of pure language processing (NLP) and machine studying to coach gadgets to grasp and course of phrases and phrases. Widespread purposes of this expertise embrace Web of Issues (IoT) home equipment equivalent to sensible thermostats or assistants like Amazon‘s Alexa.

The AI embedded in these instruments may also help you set reminders, acquire normal info by asking a query, and even change the temperature all through your property — all by leveraging your voice and eradicating any guide or bodily steps in between.

Based on Statista, the worldwide complete addressable market (TAM) for speech recognition is estimated to succeed in $15.9 billion by 2030 — barely greater than double what it’s value immediately.

Whereas there’s clear demand for AI-powered speech recognition, which companies are literally investing on this expertise? The reply might shock you.

What firms are investing in voice assistants?

Along with Amazon, the businesses listed under have invested considerably into AI voice assistants during the last a number of years:

• Alphabet: Just like Amazon, it additionally has a line of smart-home merchandise. The corporate’s Google Residence gadgets are primarily a direct competitor to Amazon’s Alexa, whereas the corporate’s smart-home merchandise — together with audio system, thermostats, doorbells and locks, and far more — are offered below its Nest model.
• Microsoft: A few years in the past, the corporate acquired a developer of AI voice recognition known as Nuance for almost $20 billion. Nuance gained traction in just a few essential finish markets, however primarily centered on healthcare. For Microsoft, the deal represented a possibility to leverage a brand new sort of expertise whereas additionally permitting the corporate to cross-sell its varied providers — explicit its Azure cloud computing infrastructure — to main organizations already working with Nuance. Its associate OpenAI has additionally been experimenting with voice-powered AI instruments. Though it is nonetheless early days, Microsoft seems to be effectively positioned within the speech recognition phase of the AI panorama.

• Apple: The corporate’s main foray into speech recognition is thru its AI assistant, Siri. It is built-in all through Apple’s {hardware} merchandise and may perceive customers’ voices to reply questions and carry out fundamental duties equivalent to scheduling. A number of years in the past, Apple additionally acquired Shazam, an app that may course of musical lyrics and generate info together with the artist, album, and track title.
• Nvidia: The corporate is probably essentially the most peripheral participant amongst large tech with regards to voice recognition software program. Based on its 13F filings, Nvidia owns a small fairness stake in SoundHound AI by way of an funding it made within the firm when it was nonetheless non-public.

Why SoundHound AI makes a logical acquisition candidate

I see just a few causes SoundHound is a lovely acquisition candidate. First, the marketplace for AI speech recognition is predicted to develop significantly over the following a number of years. Moreover, lots of the world’s most influential companies have already invested considerably into any such expertise.

To me, SoundHound AI represents one other sew within the broader AI voice material — and one which comes with some distinctive options.

It primarily focuses on business-to-business (B2B) finish markets equivalent to eating places, hospitality, and automaking. Nevertheless, the corporate additionally developed an app that competes with Shazam, and so it additionally has merchandise that sort out a extra business-to-consumer (B2C) alternative as effectively.

SOUN income (quarterly) knowledge by YCharts.

I discover the traits detailed above fairly attention-grabbing. SoundHound AI is witnessing spectacular demand, however the firm is but to succeed in the size wanted to develop profitably. Contemplating that large tech is already investing closely in voice-powered AI, I believe it is protected to say that SoundHound AI goes to have hassle competing with these companies given its restricted monetary horsepower.

The one disadvantage with SoundHound AI is valuation. At a price-to-sales a number of (P/S) of 46, the inventory is much from a discount. However with that mentioned, the corporate’s market cap is roughly $5 billion. For most sensible acquirers, such a price ticket is not an issue.

These components have me considering it might be higher off functioning inside a bigger group with a extra sturdy steadiness sheet. In different phrases, gaining access to the sources of bigger companies might probably pace up SoundHound AI’s progress significantly.